ASSISTANT COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE-3(2), HYDERABAD vs. P SHIVMOHAN REDDY, HYDERABAD

Facts of the case, in brief, are that the assessee is an individual and is deriving income from capital gains. He filed his original return of income u/s 139(4) of the I. T. Act on 23.2.2017

Subsequently, the Assessing Officer issued notice u/s 153A of the Act to the assessee on 29.5.2018 and the assessee in response to the same filed his return of income on 20.8.2018 admitting total income of Rs.15,89,14,771/-. The Assessing Officer issued statutory notices u/s 143(2). Initially there was no compliance to the statutory notices for which the Assessing Officer initiated penalty proceedings u/s 271(1)(b) and order u/s 271(1)(b) was also passed on 21.11.2019 levying penalty of Rs.10,000/-. During the course of assessment proceedings, the Assessing Officer noted that certain incriminating materials were found and seized during the course of search and the statement of Shri P. Shivmohan Reddy i.e., the assessee was recorded in which he accepted that he has been receiving money in the form of cash from the buyers on sale of immovable properties. He noted that the assessee in his statement recorded u/s 132(4) had admitted an amount of Rs.3,84,70,000/- on account of cash received over and above the registered sale consideration for the impugned A.Y. However, the assessee in his return of income has not disclosed the same. The Assessing Officer extracted the questions put to the assessee during the course of search and the reply of the assessee to such queries, the relevant portion of which are as under: Page 2 of 16

He, therefore, confronted the same to the assessee. The assessee submitted an affidavit filed before the investigation wing for retraction of the sworn statement. However, the Assessing Officer rejected the same on the ground that the same is an afterthought without any proper substantial explanation. Since the assessee during the course of search in the statement had categorically admitted that the difference between the

Before the learned CIT (A), the assessee challenged the addition made by the Assessing Officer. It was submitted that an affidavit retracting from the statement so made during the course of search in the statement recorded u/s 132(4) was filed before the Investigation Wing on 13.1.2018. It was submitted that the purported document which is part of the material found has no base at all for estimating the undisclosed income of the assessee for various A.Ys. It was submitted that the document i.e., page 48 itself was forcefully written from the assessee by the Departmental Officials at the time of search for the reasons best known to them. The answers to the statement recorded on 23.11.2017 was also extracted from the assessee who was not in proper state of mind and not knowing the implications. After consulting the legal practitioners, the assessee immediately filed an affidavit before the DDIT (Inv.) on 13.01.2018 wherein it was contended that the sworn statement dated 23.11.2017 was not voluntary and the document was forcefully written and the statement was also recorded under coercion and the assessee was not in proper state of mind. However, the Revenue Officials have not acted upon the affidavit so made by the assessee. Further, the document so seized was not signed by the assessee himself. It was just written forcibly and confirmed with the assessee as if it is found and

Referring to certain decisions it was submitted that the statement given under force or coercion is not valid under the law and the same cannot fasten a liability on a taxpayer. It was argued that mere admission does not per se become income of the assessee. It should be a valid statement in the eyes of law, taking into a/c the factual and legal position of the case. Further, it was submitted that although the assessee has given the details of the units sold, parties to whom the units were sold and the contact details were offered, the Assessing Officer without making any further enquiries acted merely based on the sworn statement of the assessee which was subsequently retracted by him within reasonable time and made the addition as unaccounted business receipts which is not legal in the eyes of law. Further, there is no evidence on record to show that the assessee has received any extra money for sale of unit at Imperial Towers, Ameerpet, Hyderabad over and above what is recorded in the sale deeds. Therefore, the addition made based on unauthenticated paper is not valid.

Relying on various decisions, it was argued that the addition made by the Assessing Officer is not justified. The CBDT instructions dated 18.12.2014 was also brought to the notice of the learned CIT (A) according to which the Board itself was aware of the undue influence, coercion that have come to the notice of the CBDT and that some of the appellants were forced to admit undisclosed income during search/survey conducted by the Department and in many such cases, such admissions were retracted in subsequent proceedings since the same are not Page 5 of 16

Based on the arguments advanced by the assessee, the learned CIT(A) deleted the addition by observing as under: “7.0) I have gone through the facts of the case and the 7.0) the gone submissions of the appellant. The basis of addition the year under consideration is the noting on page 48 of Annexure A/PSMR/Hyd/17- 18/2, dated 15.03.2015. The paper purportedly contain the details of sale of unit no.5A, Ground Floor to one Sri RBN Murthy, wherein the calculation is made @ Rs.8,000/- per sq.ft. for 2300 sq.ft sold to him. The appellant's statement was recorded on 23.11.2017 during the course of search. The appellant has filed retraction in the form of affidavit dated 13.01.2018 wherein it was alleged that the above notings were got written during the course of search. There is no discussion in the order about the contents of the retraction statement/affidavit filed by the appellant. The appellant categorically stated that the contents of the paper were got written during search and the AO, simply, without bringing any facts on record has made addition based on the contents of above and the disclosure made by the AO. The appellant has pointed out that the sales were made to reputed companies (TATA AIG) at Rs.5,750/- per sq.ft. only. In view of the factual position as above and the fact that there is no evidence to show that consideration in cash was received from other buyers, the addition made does not stand on sound footing. The addition made by the AO is not backed by any corroborative evidence. The notings on a rough paper cannot be sold evidence for making addition, that too when the document/contents itself is challenged by the AO. The action of the AO in relying on the statement u/s 132(4) and the document whose authenticity is challenged by the appellant, without bringing any corroborative evidence on record, is not justified. No efforts were made to conduct any enquiries with the buyers to support the contention of the AO. Keeping in view the facts and circumstances of the case as above, the addition is not warranted and the same is deleted. The relevant grounds are allowed”.

Aggrieved with such order of the learned CIT (A) the Revenue is in appeal before the Tribunal by raising the following grounds of appeal: “1.The ld.CIT(Appeal) erred both in law and on facts of the case in allowing relief to the assessee.

The learned DR heavily relied on the order of the Assessing Officer. He submitted that the assessee during the course of recording of his statement u/s 132(4) of the I.T. Act had himself calculated the undisclosed income on account of cash received over and above the registered sale consideration at Rs.3,84,70,000/- for A.Y 2015-16 Rs.3,37,55,000/- for A.Y 2016- 17 and for A.Y.2017-18 at Rs.48,75,000/- for three A.Ys. Therefore, retracting the same and not admitting the same in the return of income filed u/s 153A is not justified. He submitted that the ld CIT (A) without appreciating the facts properly has deleted the addition which is not justified. He submitted that the powers of the learned CIT (A) are co-terminus with that of the powers of the Assessing Officer and he can do what the Assessing Officer failed to do. Therefore, under the facts and circumstances of the case, the learned CIT (A) was not justified in deleting the addition.

The learned Counsel for the assessee, on the other hand, heavily relied on the order of the learned CIT (A). Reiterating the submissions made before the learned CIT (A), he

Referring to the decision of the Hon'ble Supreme Court in the case of CIT vs. S. Khader Khan Son (2012) reported in 352 ITR 480, he submitted that the Hon'ble Supreme Court upheld the decision of the Hon'ble Madras High Court (300 ITR Page 8 of 16

Referring to the decision of the Hon'ble A.P. High Court in the case of CIT vs. Naresh Kumar Agarwal reported in 369 ITR 171, he submitted that the Hon'ble High Court has held that retraction made within a period of 60 days is a valid retraction. It has been held that if the statement made during the course of search remains the same it can constitute the basis for proceeding further under the Act even if there is no other material. If, on the other hand, statement is retracted the Assessing Officer has to establish his own case and the statement that too retracted from the assessee cannot constitute the basis for an order u/s 158BC of the I.T. Act.

Referring to the decision of the Hon'ble Supreme Court in the case of CIT vs. P.V. Kalyanasundaram reported in (2007) 294 ITR 49 (S.C), he drew the attention of the Bench to the head notes which read as under: “Certain land was sold for a sum of Rs. 4.10 lakhs. In the course of a search and seizure, contradictory statements of the vendor were recorded and loose sheets allegedly in the hands of the purchaser were found. The Assessing Officer concluded that the sale consideration was actually Rs. 34.85 lakhs and not Rs. 4.10 lakhs as recited in the deed of sale and made an addition of Rs. 30,75,005/- as undisclosed income for the block period April 1, 1988, to December 8, 1998, in the hands of the respondent (assessee). The Commissioner (Appeals), after examining the entire matter, held that the statements of the vendor could not be relied upon particularly as the floor price fixed by the authorities for such property was much lower than the value which would result if the sale deed had been registered at Rs. 34.85 lakhs and deleted the addition. The Appellate Tribunal affirmed the decision of the Commissioner (Appeals) holding, inter alia, that the notings on the loose sheets were vague and could not be relied upon. On appeal under section 260A of the Page 9 of 16

Referring to the decision of the Hon'ble Supreme Court in the case of Mehta Parikh & Co. vs. CIT reported in 30 ITR 181, he drew the attention of the Bench to the following observations of the Hon'ble Supreme Court: “It has to be noted, however, that beyond these calculations of figures, no further scrutiny was made by the Income-tax Officer or the Appellate Assistant Commissioner of the entries in the cash book of the appellants. The cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponent of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner, considered it necessary to call for them in order to cross examine them with reference to the statements made by them in the affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits.”

Referring to the decision of the Hon'ble Supreme Court in the case of CIT vs. Shivakami Co. P Ltd reported 159 ITR 71, he submitted that unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for computation of capital gains”.

Relying on various other decisions, he submitted that section 132(4) statement which was subsequently retracted has no evidentiary value unless backed by corroborative evidence. He again reiterated that the so-called statement was forcefully

We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.3,84,70,000/- on account of cash received over and above the registered sale consideration on the basis of the statement made by the assessee u/s 132(4) of the Act during the course of search on 23.11.2017. We find the learned CIT (A) deleted the addition the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the learned DR that the assessee in his statement recorded u/s 132(4) had declared undisclosed income of Rs.7,71,00,000/-. Although the assessee had stated that he has retracted from the statement by offering the additional income, however, the same was an afterthought without any supporting evidence and therefore, is a self-serving document. It is his submission that since the powers of CIT (A) are co-terminus with that of the power of the Assessing Officer, the learned CIT (A) could have directed the Assessing Officer to conduct further enquiries on the basis of submissions made by the assessee and

We find some force in the above arguments of the learned DR. It is an undisputed fact that the assessee during the course of search in his statement recorded u/s 132(4) on 23.11.2017 had declared undisclosed income of Rs.3,84,70,000/- for the impugned A.Y, Rs.3,37,75,000/- for A.Y 2016-17 and Rs.48,75,000/- for A.Y 2017-18 all totaling to Rs.7,71,00,000/-. Although the assessee had filed an affidavit before the Investigation Wing on 13.1.2018 retracting the statement so made, however, the fact of such retraction when brought to the notice of the Assessing Officer was rejected by him in absence of any substantive explanation and treating the same an afterthought. A perusal of the seized document shows that the assessee has sold Unit No.5 at Ground Floor to one Mr. R.B.N. Murthy for a consideration of Rs.1,92,50,000/- out of which the cheque amount was shown at Rs.1,35,00,000/- and the balance amount was received in cash. We find the assessee had sold various units during the financial year 2015-16 to 2017-18 to different persons, the details of which are as under: S. Date F.Y Name of Floor Builtup Sale Rate per No the Area sq.ft consideration sft. vendee 1 27.2.15 2014-15 S.Rajmouli & Gr.Floor 340 19,62,000 5771 others 2 27.2.15 2014-15 -do- 1st 8108.18 4,06,88,000 5018 3 19.3.15 2014-15 K.Krishna Gr.Floor 1840 1,09,20,000 5935 4 19.3.15 2014-15 R.B.N. Murty Gr.Floor 2300 1,35,00,000 5870 5 19.3.15 2014-15 K.Durgaprasad Gr.Floor 2300 1,35,00,000 5870 6 16.3.15 2014-15 Sunmeet Singh Gr.Floor 500 28,70,000 5740 Kohli & others 7 25.3.15 2014-15 Siva Charan Reddy 7th Floor 2380 1,00,13,000 4207 4th floor 8 10.2.16 2015-16 Vesta Tech. Pvt 2800 1,17,55,000 4198 Ltd 9 25.2.16 2015-16 S.Rajmouli & 2nd floor 10702 4,95,00,463 4625 Others

Although it is the submission of the learned Counsel for the assessee that he has retracted from the statement within a period of 60 days by filling an affidavit before the Investigation Wing, we find the Assessing Officer rejected such retraction treating the same as an afterthought and not based by any substantive explanation. Further, it is also an admitted fact that the assessee was not complying to the statutory notices before the Assessing Officer for which penalty of Rs.10,000/- was levied under the provisions of section 271(1)(b) of the I. T. Act. So far as the contention of the learned Counsel for the assessee that the Assessing Officer has not made any enquiry is concerned, which the CIT (A) has also accepted, we find the CIT (A) failed in his duty by not conducting any enquiry himself by calling for a remand report from the Assessing Officer or by giving direction to him to conduct further enquiries before deciding the issue. It is the settled proposition of law that the powers of the CIT (A) are co- terminus with that of the Assessing Officer. If the Assessing Officer has failed to do something, the CIT (A) can do the same. Since the assessee in the instant case has sold flats in different floors to different persons at different rates, and a piece of paper was found during the course of search containing cash receipts, therefore, the CIT (A) atleast should have conducted some enquiries by directing the Assessing Officer to conduct further enquiries by calling for details or by summoning other parties to find out the truth. Since the learned CIT (A) has failed in his duty by not directing the Assessing Officer to conduct enquiries before Page 13 of 16

After hearing both sides, we find the grounds raised by the Revenue are identical to the grounds of appeal in ITA No.60/Hyd/2021. We have already decided the issue and the grounds raised by the Revenue has been allowed for statistical purposes. Following similar reasonings, the grounds raised by the Revenue are allowed for statistical purposes.

In the result, both the appeals filed by the Revenue are allowed for statistical purposes.